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Open Letter to Alexandria Ocasio-Cortez

By Lobo Tiggre

Dear Rep. Ocasio-Cortez,

Your official House web page requires me to enter a zip code in your district to send you an email. I understand that you work for your constituents, but you’re going to vote on laws that affect everyone in the United States, and you’ve become a national figure. So, while I live in Puerto Rico and not New York, I’m writing you this open letter, hoping it reaches you.

First, I want to say that while I disagree with every policy idea I’ve heard you advance, I don’t hate you. I’m not here to call you names, nor gain brownie points from “my side” by attacking the object of their fear, anger, and derision.

Actually, I have no side. I’m not a member of any political party. Or perhaps we’re on the same side; you clearly seem to care more about people than parties. So do I.

That’s why I’m writing. I’m giving you the benefit of the doubt, taking you at face value. You seem intelligent, well informed, and sincere. Your willingness to attack entrenched injustice regardless of the consequences for your career is admirable. And if you are what you appear to be, then you should be willing to engage in respectful dialog with those who disagree with the means you propose to achieve ends we may well agree upon.

I suspect we’d both like to see a future in which people flourish in a world no longer scarred by bigotry and institutionalized violence, motivated more by positive dreams of the future than nightmare fears of the past.

If so, I’d like to talk with you. I’d like to exchange ideas and—if either of us is as intellectually honest as we’d like to believe—find where either you or I might be wrong about some of the things that divide us. Your socialistic and my libertarian approaches can’t both be right. If we approach such a conversation in the spirit of seeking truth, rather than of attacking those we disagree with, we might both learn something.

An open, honest, and respectful exploration of whatever it is that divides us could help elevate a national conversation that’s been dragged down into the gutter for years.

I’d be happy to call you whenever you like, or go to Washington or New York to meet with you. Or perhaps we can talk here in San Juan the next time you visit family here.

Here are some of the issues I’d like to explore:

  • When asked about your policy initiatives, your answers seem purely pragmatic. Is that the basis of your ethics? If “whatever works to achieve my goals” is what’s right—if the ends justify the means—then how do you prevent atrocities in the name of the greater good?
  • If you have some other ethical system, what is it? How do you tell right from wrong? And if in your view something is wrong for an individual, like killing someone who has committed no crime, or stealing from them—even in the name of the greater good—should it not also be wrong for the state?
  • I’m sure you know the old saying: “Power corrupts, and absolute power corrupts absolutely.” You’re battling entrenched, corrupt power right now. But in order to achieve your goals, you would give more power to the state. Even if that achieves your goals, do you not fear that same power could be applied to achieve goals you don’t like in the future? For example, state control of the medical sector would mean control over women’s reproductive rights—which would then be subject to the vote in the future.
  • A. Hayek’s famous book The Road to Serfdom is perhaps the most powerful critique of your approach to public policy. Have you read it? How do you answer Hayek’s arguments?

Fair is fair, so if you’d like, you can ask me any questions you’d like. I’d be happy, for example, to address the question you brought up regarding the morality of a world in which billionaires are possible.

I know you’re busy. I’m busy too. But you seem so sincere, I do hope you’ll take the time at least open a dialog with me.

Best regards,

Lobo Tiggre

Lobo Tiggre is a long-time libertarian activist and a director of Liberty International. He’s also the founder of IndependentSpeculator.com, as well as the author or co-author of several books, including Totally Incorrect and Right on the Money, co-written with legendary libertarian investor, Doug Casey.

Categories: Libertarian Media

Cleaning Up “Marxist Trash” is the Best Way for Bolsonaro to Build a Better Brazil

By Tho Bishop

The long-running joke about Brazil is that it is the country of the future, and always will be. If Jair Bolsonaro is able to follow through on the tone he has set at the start of his presidency, however, it may not be long until the future becomes the present.

Officially sworn into office at the start of the year, the Bolsonaro administration has already captured international attention. Having been portrayed for years by Western media as a sinister threat to Brazilian democracy, in spite of being a successful populist candidate embraced by a diverse electorate, the same outlets have been quick to depict the new government as a hostile threat to minority rights. The real story, however, is Bolsonaro’s apparent commitment to the sort of ideological revolution that is desperately needed for his country to thrive. While history shows we should never trust a politician to deliver on lofty promises of liberty and freedom, the initial days of his presidency have moves deserving of praise.

To start, his inaugural address, Bolsonaro vowed to follow through on his campaign message of dramatically changing a government plagued by corruption and economic crisis:

“I stand humbled by the honor to address you all as President of Brazil, and stand before the whole nation on this day as the day when the people began to liberate themselves from socialism, from the inversion of values, from state gigantism and from political correctness. … Our flag will never be red. It will only be red if we need to bleed over it to keep it green and yellow.”

He followed this up with a tweet vowing “to tackle the Marxist garbage in our schools head on.”

What’s encouraging here is that Bolsonaro is identifying that the true enemy of his administration is not simply a political rival or a series of bad policies that must be reformed, but the socialist ideology that has caused so much misery throughout the world and Latin America in particular. Correctly identifying the underlying problem is the best way to go about finding a solution.

This aligns well with Ludwig von Mises’s views about the importance of ideas in society. He wrote extensively about how the ultimate deciding factor to the success or failure of civilization has less to do with the politicians and institutions that have been built, but the underlying ideas that direct them. As he wrote in Economic Policy:

“Everything that happens in the social world in our time is the result of ideas. Good things and bad things. What is needed is to fight bad ideas. We must fight all that we dislike in public life. We must substitute better ideas for wrong ideas. … Ideas and only ideas can light the darkness.”

Of course, a true ideological revolution requires more than simply political rhetoric and rousing speeches, the question will be how he is able to follow through with pro-market policies that will actually allow Brazil to succeed.

Luckily what most of the Western media has completely ignored is that the rise of Bolsonaro isn’t as simple as populist politics sparked by the corruption of presidents past, the country has seen a remarkable rise in pro-market and libertarian scholars within its intellectual class.

Thanks to organizations such as Mises Brasil, Instituto Rothbard, Students for Liberty and more, the works of great thinkers such as Mises, Murray Rothbard, Frédéric Bastiat, and more have been translated and dispersed throughout the country. President Bolsonaro has even been photographed with Portuguese copies of Bastiat’s The Law and Mises’s Economic Policy.

This is important not only because it highlights the growth of these ideas beyond the narrow lens of politics, but also because it demonstrates that Bolsonaro has a talent pool to be able to tap into for his administration. In the words of Mises Brasil president Helio Beltrão, the new president has put together a “remarkable team and with noble intentions.” This includes scholars affiliated with various free market and libertarian organizations, including Mises Brasil, have been tapped for positions within the administration — including Bruno Garschagen, host of their popular podcast. The new Minister of Education, Ricardo Velez Rodrigues, was himself a guest of the show.

Naturally, when taking over a huge government bureaucracy that has long been under socialist control, removing bad actors is every bit as important as bringing in new talent. While Donald Trump brought the term “the Deep State” into the American mainstream, his administration has been damaged by failing to truly drain the swamp of its long-standing political professional class. Here too is another area where Bolsonaro’s administration is showing true promise.

On January 3, Chief of Staff of the Presidency, Onyx Lorenzoni, announced that the Bolsonaro government will be removing communist-sympathetic officials from positions of public administration. While headlines about “communist purges” from a “right-wing Latin American leader” are designed to evoke images of the bloody policies of Augusto Pinochet and Jorge Videla, firing bureaucrats is hardly comparable to “right-wing death squads.”

Of course, one of the best ways to follow through with Bolsonaro’s anti-Marxist vision would be to leave many of these vacated positions open as part of a general reduction of the Brazilian government. Hopefully, the administration will also pay heed to Helio Beltrão’s suggested plan for de-bureaucratization of the nation’s economy.

Another promising sign that has come from Lorenzoni is that he has instructed all government ministers to inventory the properties under their control so they can identify what assets are better off being privatized. The hope is that the Bolsonaro administration will follow through on the statements made by Paulo Guedes, the new Minister of the Economy, to “privatize everything that is possible.” Not only will such sales help to work down the countries debt (currently at $1.6 trillion, or 81.4% of GDP), but allow assets and companies to operate more efficiently free of the strangulation of government central planning.

While there are many signs of optimism from the early days of Bolsonaro’s government, it would be unwise to ignore the challenges that still face the country. As Leandro Roque has noted, the administration is inheriting numerous challenges, including the rising costs of retirement programs and an aging population. Will an elected populist be willing to make the painful reforms necessary? We shall see.

Also, it would be a mistake to confuse anti-Marxist rhetoric for a genuine embrace of liberty and free markets. America’s own history has shown how some of the loudest opponents of communism have enacted some of the worst policies domestically. Will Bolsonaro’s team of classical liberals be able to stand strong with the pressures of public office, or end up being a disappointment like so many others have been before? Only time will tell.

What is encouraging is to see the rise of a popular politician willing to use his platform to openly call out the dangers of Marxist ideology. If Brazil can maintain a course of Menos Marx, Mais Mises, then it will finally be able to live up to its long acknowledged potential.

Originally posted on : https://mises.org/wire/cleaning-marxist-trash-best-way-bolsonaro-build-better-brazil

Categories: Libertarian Media

In Final Plea, Economists Implore South Africa to Abandon Expropriation Plan

By Martin van Staden

It is now well-known that South Africa’s parliament intends to amend the Constitution to allow the government to expropriate (forcibly seize) private property without being required to pay compensation. On November 15, 2018, the parliamentary Constitutional Review Committee finally officialized this intention by formally recommending that the Constitution be changed.

Less than a week later, on November 20 and 21, my employer, the Free Market Foundation (FMF), hosted a conference in Johannesburg that brought together 23 participants from around the world.

Where governments have been allowed to seize property arbitrarily, economies have been left in ruins.

The goal of the “Conference on Security of Property Rights” was to allow experts from Africa, Venezuela, India, and the United States to share with South Africa the invariably detrimental experiences that other countries have had with similar policies of expropriation without compensation. Of the 22 speakers, two were from Venezuela (via video), one from India, one from the US, five from Africa— representing Nigeria, Kenya, Burundi, and Ghana—and 14 from South Africa.

All the speakers had the same story to tell: where governments have been allowed to seize property arbitrarily and without the necessary checks and balances (like being required to pay compensation), economies have been left in ruins.

FMF director Temba Nolutshungu neatly summarized the conference in this video:

https://www.youtube.com/watch?v=CGvaBiRv1Eo

Below are all the other presentations:

Leon Louw (Free Market Foundation, South Africa)

Leon Louw, the Executive Director of the Free Market Foundation, criticized the basis of the expropriation narrative in South Africa, which came in the form of several “land audits” conducted by the government and by civil society organizations. These audits paint a picture of a small number of wealthy white landowners hogging up the vast majority of South Africa’s land. Louw questions the very premise upon which the audits are based.

Land audit nonsense: Why “left” and “right” wing audits are virtually meaningless
https://www.youtube.com/watch?v=5RVdDXGF8pY

Maria Corina Machado & Sary Levy Carciente (Liberal activists, Venezuela)

Maria Corina Machado is a former member of the National Assembly of Venezuela and a former presidential candidate. Sary Levy Cariente is a professor at Venezuela’s National Academy of Economic Sciences. Both are dedicated believers in a liberal, free-market paradigm and shared the horrific story of Venezuela’s descent into authoritarian socialism and warned South Africa not to follow suit.

Lessons from Venezuela
https://www.youtube.com/watch?v=GzzkU7PUkKc

Barun Mitra (Liberty Institute, India)

Barun Mitra is the founder and director of the Liberty Institute in India. He shared India’s experiences with socialist land reform after it gained independence from the British Empire. Today farmers have insecure property rights, for which all of India suffers. “Without security of property, a sense of citizenship with a stake in the community is lost.”

Lessons from India
https://www.youtube.com/watch?v=3xzqfXnwezg

Rejoice Ngwenya (Coalition for Market and Liberal Solutions, Zimbabwe)

Rejoice Ngwenya is one of the few full-time liberal activists in South Africa’s northern neighbor, Zimbabwe. Ngwenya heads the Coalition for Market and Liberal Solutions and unequivocally warned South Africa against following in the footsteps of Robert Mugabe, whose program of expropriation without compensation left the former breadbasket of Africa a basket case.

Lessons from Zimbabwe
https://youtu.be/DjP6g47KEQ0

Olumayowa Okediran (Students For Liberty, Nigeria)

Olumayowa Okediran has been intimately involved with student libertarian activism throughout Africa since bringing the international Students For Liberty (SFL) group there in 2013. Today, he is SFL’s Assistant Director of International Programs. In Nigeria, he said, freehold ownership has been abolished and replaced with a system of leasehold whereby citizens are tenants on the property of the State. Olumayowa hoped South Africa would avoid going down the same route.

Lessons from Nigeria
https://youtu.be/elr0kjuv7d4

Franklin Cudjoe (IMANI Centre for Policy and Education, Ghana)

Franklin Cudjoe is the founding president of the IMANI Centre for Public Policy and Education in Ghana. He explained how international investors have recently begun preferring Ghana over South Africa, a fact he ascribes partly to the uncertainty around security of property rights. “You toy with this business of expropriation without compensation at your own peril.”

Lessons from Ghana
https://youtu.be/hOAfU0YVG3U

Penuell Maduna (Politician, South Africa)

Dr. Penuell Maduna is the former Minister of Justice of South Africa and was a key participant in the constitutional negotiations and drafting in the mid-1990s. Maduna briefly described the narrative around expropriation without compensation, especially the narrative advocated by the radical Marxist party, the Economic Freedom Fighters, and by the governing party, the African National Congress. He concluded that expropriation without compensation is not the way to bring about economic justice.

Remaking South Africa: Unfinished business
https://youtu.be/TfftnhZzUz8

Linda Kavuka (Students For Liberty, Kenya)

Linda Kavuka is the African programs director of Students For Liberty and a Kenyan lawyer. She explained how the abundant discriminatory land laws that existed during Kenya’s colonial period were adopted by the new independent government and made land a political issue. State ownership of land and land-grabbing by State officers and their cronies were common. These problems have since been addressed to greater and lesser extents. Kavuka concluded that expropriation without compensation in South Africa would be against the Universal Declaration of Human Rights, would reintroduce racial discrimination, and would wreck Africa’s largest, most advanced, and most admired economy.

Lessons from Kenya
https://youtu.be/HYzGjMh-OrY

Aimable Manirakiza (Centre for Development and Enterprise, Burundi)

Aimable Manirakiza is the founder of the Centre for Development and Enterprise in Burundi. He briefly laid out the struggle of weakening property rights and legal protection in Burundi, noting the importance of securing the right to earn a living and not to have one’s property seized. In warning South Africa against its plans to amend the Constitution to allow seizure of property without compensation, Manirakiza quoted Ayn Rand, who said, “No other rights are possible without property rights.”

Lessons from Burundi
https://youtu.be/7ZMr_hp5jVg

Tom G. Palmer (Atlas Network, United States)

Dr. Tom G. Palmer is well-known in American libertarian circles. A senior fellow at the Cato Institute and the Atlas Network’s vice president for international programs, Palmer was actively involved in Eastern Europe in the sunset years of the Soviet Union. As such, he shared with South Africa the horror stories of Eastern Europe and Asia’s experiences with the expropriation of private property. Noting that today there are millions of Zimbabwean refugees in South Africa who have fled from their country’s policy of expropriation without compensation, Palmer asked, “If you do the same thing in South Africa, where will you go?”

Lessons from Europe and Asia
https://youtu.be/PfHiDWtVte4

Lawrence Mavundla (National African Federated Chamber of Commerce, South Africa)

Lawrence Mavundla is the national president of the National African Federated Chamber of Commerce and Industry, which is South Africa’s oldest black business association. Mavundla sought to caution South Africa against once again giving petty officials the power to seize property on a whim, something they were empowered to do during the apartheid era. His core message was that never again should ordinary South Africans live in the fear of losing their property rights.

Lessons from South Africa: “Never Again”
https://youtu.be/8LJnU5592f8

Temba A Nolutshungu (Free Market Foundation, South Africa)

Temba A Nolutshungu is one of the directors of the Free Market Foundation. He talked about the FMF’s Khaya Lam (“My Home”) Land Reform Project, which is dedicated to expediting the process of acquiring title deeds on former State-owned land by current tenants. An estimated five million poor, mostly black South Africans live as tenants on municipal land, a holdover from apartheid planning law, and are waiting to acquire full ownership from the democratic government. Nolutshungu argued that this is where quick and substantive land reform can happen and that expropriation without compensation would undermine the new property rights these South Africans have acquired.

Transforming the urban landscape through FMF’s Khaya Lam Project
https://youtu.be/Ac49a4wixhE

Perry Feldman, Maria Klaas & David Ubane (Khaya Lam, South Africa)

Perry Feldman is the project manager of the Free Market Foundation’s Khaya Lam initiative. He spoke to two beneficiaries of the Khaya Lam process, Maria Klaas and David Ubane, both from the Tumahole township in the Free State province. Both David and Maria expressed joy at the fact that they were now property owners and no longer tenants of the State and said they hope this state of affairs would persist.

Transforming the urban landscape through FMF’s Khaya Lam Project
https://youtu.be/23dpzh71TjA

Eustace Davie (Free Market Foundation, South Africa)

Eustace Davie is one of the directors of the Free Market Foundation. He, too, expressed the virtues of the Khaya Lam initiative but noted that there exists an even simpler and more affordable method of recognizing the ownership of the former tenants of the apartheid State. “Form DDD” is a deeds registry form that recognizes ownership, but stops short of processing title deeds, at virtually no cost. According to Davie, if communities around South Africa could get tenants to sign Form DDD en masse, this would lead to immediate security of tenure and make the processing of title deeds in the future easier.

Fast, affordable, simple: Khaya Lam’s property transfer process
https://youtu.be/fBALnW0HPOo

Candice Pillay (Hogan Lovells, South Africa)

Candice Pillay is an attorney and partner at the law firm Hogan Lovells and has personally worked with many disadvantaged South Africans trying to vindicate their rights against the State. Her talk focused on the government’s housing project—often called “RDP houses”—and the ostensible title deeds that are given to beneficiaries.

RDP houses, under the Housing Amendment Act of 2001, come with restricted titles whereby beneficiaries are disallowed from selling or subletting their homes for a period of eight years. If they wish to move, they must give the house back to the government and be placed on another waiting list. Pillay suggested that the restrictive title that comes with government-subsidized homes should be replaced with full ownership.

How removing RDP preemptive clauses will make home ownership a reality
https://youtu.be/qJT99BizONw

Martin van Staden (Free Market Foundation, South Africa)

As the legal researcher at the Free Market Foundation, I spoke about the work we have been doing around the Subdivision of Agricultural Land Act. The Act, enacted at the height of apartheid in 1970, prohibits farmers from subdividing their farms into smaller, more affordable plots, which they can sell or give to farm tenants or local communities without going through a bureaucratic and arbitrary process of getting permission. I suggested that if government is serious about speedy land reform, the Act should be repealed.

Subdivision law hinders quick rural land reform
https://youtu.be/6D-KOvNt2xQ

Devon Windvogel (University of KwaZulu-Natal, South Africa)

Devon Windvogel is a lecturer in the School of Accounting, Economics, and Finance at the University of KwaZulu-Natal. He explained that expropriation without compensation has the potential to destroy the economic organization of South Africa, thereby leading to massive job losses. Windvogel also explained how the apartheid government severely restricted the property rights of the black majority. In other words, it is a lack—not an abundance—of property rights that caused South Africa’s poverty.

Expropriation without compensation: Yet another barrier to entry for millions of disadvantaged South Africans
https://www.youtube.com/watch?v=1rPdm57Ipyg

Terence Corrigan (Institute of Race Relations, South Africa)

Terence Corrigan is a policy fellow at the Institute of Race Relations and is intimately involved with the institute’s land reform work. He set out the problems permeating South Africa’s post-1994 land reform policy and, as an alternative, suggested that land reform must focus on empowering new owners (as opposed to empowering the State). “It is an affront to people’s dignity to regard them as perpetual wards of a supposedly benevolent state.”

If government is serious about land reform, it should create owners, not tenants
https://www.youtube.com/watch?v=ajkoeyCiEGA

Petrus Sitho (Property Activist, South Africa)

Petrus Sitho is a full-time activist for property rights, going around South Africa telling farmworkers that supporting expropriation without compensation will mean disaster for them. When the farms are expropriated and the State takes over, unemployment awaits.

Expropriation will cause job losses and economic decline—leave section 25 alone
https://www.youtube.com/watch?v=c6mbSbWMrI0

Phephelaphi Dube (Centre for Constitutional Rights, South Africa)

Phephelaphi Dube is a lawyer and the director of the Centre for Constitutional Rights. She explained the workings of section 25 of the Constitution—the provision that Parliament intends to amend—and explained why it is unnecessary to do so if the government is interested in substantive land reform. All the necessary powers to pursue land reform are already in the Constitution, and going about constitutional change is ill-considered.

It is not necessary to amend the Constitution for land reform
https://www.youtube.com/watch?v=aUmqiJBG-QY

South Africa is at a crossroads: it can choose to remain Africa’s most developed economy by respecting property rights, or it can decide to follow the example of Venezuela, Cuba, and Zimbabwe by empowering government to seize property arbitrarily and without having to compensate owners. If it decides on the latter, South Africa’s post-apartheid success story will have been a tale of a short 24-year interval between two authoritarian eras.

 

 

Martin van Staden is Legal Researcher at the Free Market Foundation of South Africa and the Academic Programs Director of Students For Liberty in Southern Africa. He has a law degree from the University of Pretoria and is a Young Voices Advocate.

Categories: Libertarian Media

Beyond Austrian Economics

By Dean Peng

I am an Austrian school economist. The reason is purely logical: Austrian economics is the only logically consistent economics.

However, I will not continue contrasting Austrian economics with other “schools” and argue why Austrian is correct others are wrong. This has been done already, probably too much. 

First thing first, I want to argue that the term “school” is misused.

 There are schools in science and mathematics. Each school is good at some subjects. Warsaw school, headed by Alfred Tarski, was the best in mathematical logic. There was a Chinese school of mathematics, which was leading the studies of value distribution. Obviously, “school” is misuesed in economics. There are no schools but only doctrines. Different schools should learn from each other, while different doctrines only fight each other. The doctrine proposed by John M. Keynes is called Keynesianism, which has been falsified. Karl Marx proposed a theory of economics, which is a part of Marxism. Marx himself was aware that it was wrong. He couldn’t finish his Das Kapital. However, some people continue claiming that it is the ultimate truth, immune from criticism. Austrian economics was founded by Carl Menger and was developed by others. It is the only economic theory that is self-consistent. I am going to outline this theory, while leaving the origination and development of other doctrines to the subject of the history of economics. Strange enough and sad enough, students of other disciplines spend little time studying the history of their science (students of physics study theories of physics instead of history of physics), while students of economics are dumped in various different doctrines.

Now, I will briefly outline this valid theory of economics (so-called Austrian school).

1.       The object that economics studies is not natural phenomena. By studying the unintended yet necessary consequences of human action, it discovers the laws of human action. Economics  in the narrow sense studies human action in regard of wealth creation and distribution. Economics in the broad sense studies human action in general. Ludwig von Mises invented the term praxeology for this broad-sense economics. I will limit myself in the narrow sense of economics.

2.       Some material things and services (we call them goods) meet human demands. Air, water, food, clothes, traffic, even sex service. However, not everything of use is of value. Air, for example, is of vital use. But in most circumstances it is of no value. People get it for free, because it is abundant. Only those scarce goods of use are of value. They are wealth. People  chase wealth and exchange wealth for other wealth. People can chase wealth by stealing, robbery, burglary or even by pure luck (find a diamond on the ground). Here we only study economic actions of chasing wealth, i.e., to produce and to exchange. We start with production. People transform sth of no value (sand) to sth of value (semiconductor) or increase the value of sth (cooking, oil refining) via labor. However, not all labor creates value. Labor creates value only when it creates sth that is needed. It happens from time to time that farmers planted too many bananas or potatoes, far more than what is needed. In this case, bananas or potatoes are dumped and labor is wasted. Net loss. So we see there is no necessary connection between labor and value. Marxist theory of value determined by labor collapsed. As I said, pure luck (no labor) can bring value. A beautiful face or charming legs of a celebrity, where there is no labor involved, can be very valuable. I may go fishing for vain, hard labor evaporates. I may plant scallions year after year, and pay same amount of labor. But a natural disaster suffered by other scallion plantations will increase the value of my harvest. So we come to 2 conclusions: Value precedes labor. Value is determined by need. Labor is value-oriented. Now, if value is not an intrinsic character of goods, it may vary from place to place and from time to time. Same goods may be of different values at different geographical or time spots. This explains why commerce or speculation creates value.

3.       A further comment on value. Is value subjective? Yes, it is, but with restraints. Scallions are of value because some people enjoy it. For those who don’t like it, it is of no value, in the subjective sense. However, under the restraints of market, scallions acquire an objective value determined by demand and supply. I like scallions and I am willing to pay a high price for them in poor harvest years. However, in good harvest years, I don’t have to pay that price. I need only to pay the objective market price. So we see that subjective evaluation of any individual is invalid in a big enough market. Market prices are determined by collective evaluation of buyers and sellers. Subjective individual evaluations turn out objective prices via market. BTW, even individual evaluation is not completely subjective. Some people like sweet food but hate chilli. I am addicted to chilli while unable to tolerate anything sweet. This is fine. But if someone likes dust, that is a disease. If someone like shit…Although I don’t know anyone of the kind, I do know people who claim their firm belief in ridiculous Marxism.

4.       Now we come to exchange. Exchange is one of the basic key concepts in economics. Animals in the Nature have no conception of ownership. There is only consumption no ownership in the jungle world. A leopard captures an antelope. It can eat it but cannot occupy it. If a lion passes by, the prey goes to the lion. The residuals cannot be sold but only dumped and goes to hyenas and bald eagles. However, human beings understand that they possess sth. This conception implies exchange. In the very primitive stage, I am willing to exchange 3 pound of grain for a chicken, because a chicken is of higher subjective value for me and the subjective evaluation of the chicken owner is the opposite. This exchange soon resulted in marketplace, where exchange is gauged by objective prices. Unavoidbly, there comes the need for a general medium of exchange. Currency comes into being. A very important note here. Currency does not only facilitate exchange, it is also a general measure of value. We will come back to this point later. It is obvious that those goods which are relatively stable in amount and easy to keep serve as currencies. Shells, millet (in revolution years in China), Camel cigarettes and silk stockings in post war Germany served as currencies. Well, naturally,  inert precious metals, gold and silver in particular, became the main types of currency before legal tender.

5.       Currency measures value. It is too important a tool in economic life. Economic calculation becomes possible because of it. With currency, people will know that a pound of beef can exchange for 6 pound eggs. Beef and eggs are of different individual subjective values, but they are equal in objective price. Exchange is equal in this sense. Only with currency can people evaluate values of goods of totally different nature. More than this. A general measure of values makes long-term economic projects possible. This brings the basic drive of economic development—investment. People will be able to calculate how much money they should invest in making facilities, and how much rewards they can expect. People can choose from different options to invest on the most rewarding, in other words, most wealth-creating project. Of course the currency has to be sound. I will come to this later. Currency deflects wealth of different nature into mathematical figures and therefore make them comparable. If I want to build a bridge, I have options of a wood one or a steel one. Each project involves thousands of thousands of specific elements. With currency, I need only to know how much each option costs, how long each life-span is, how much rewards each will bring to me. I can make a reasonable decision with this calculation. Currency is considered source of all evils by some extremists. But the reality is, only Khmer Rouge abolished currency. This most evil regime in human history quickly went back to primitive communism. It had no commodities, no marriage, no families, but only Anka and its slaves. It survived 4 years before being overthrown by Vietnamese because China supplied it everything it needed, of course for free because it had no money. Even overall socialist planning in Soviet Union before 1991, in China before 1978, and in PD(Democratic!)R Korea required currency to make plans.

6.       Gold and silver were main currencies. And there were standards, gold standard and silver standard. Later there came banks, and paper credit came into being. Soon enough, the state took over currency issuance. With the invention of paper and printing, legal tender, which is pure credit, came into being. Almost all state tend to issue more currency than it should. They debase metal money or print more paper money than it should. Therefore inflation has been seen all along human history all over the world. Some dynasties failed on it. Venezuela, Zimbabwe are the latest examples. Other than that, the discovery od silver mines in Mexico contributed a lot in the destruction of China’s silver standard. Now comes our question. What is the criteria of a “sound” currency? Currency, as the measure of value, has to be stable, both in material and in value. It has to be in correspondence with actual wealth in a highly stable manner. Therefore, it is easily seen that not everything of a value can be used as currency. Lobsters are of high value, and they cannot become currency. Glasswares are of value, but if we use them as currency, the value will soon devaluate because they will be produced as much as possible. Electronic products are of value, but their values are in no way stable. Gold was the only standard that could have been valid. However, the amount of gold does not meet the need of modern world. The collapse of Breton Woods System (35USD = 1 ounce of gold, not only in value but in material) is of no surprise. Today people have to deal with paper money, or legal tender, which is credit in essence. We see how much USD or GBP or RMB devaluated. Yet on the other hand, so much wealth has been created, which makes inflation tolerable. Today people have no other option other than legal tender, with the hope that it will not inflate in a Venezuelan manner. So the reality is, there is no standard of money issuance! Can we invent one? Yes. Let’s look it this way. We can practise a standard not grounded on gold but anchored by gold. That is, the authorities monitor the price of gold in the free market, and guarantee that price to be stable. In this way, paper money acquires a credit, in the sense that 35USD can buy what an ounce of gold can buy. When gold price goes up, the central bank shrinks the circulation, and vice versa. A comment on Bitcoins. They are of value, and they are limited in amount as gold is. They may be collectibles, but cannot serve as currency.

7.       Now we come to credit, which is the derivative of currency. Financial institutions may creat credit in the market. In essence, credit is IOU to the society. Commercial credit undergoes a creation-annihilation cycle. In normal circumstances, credit will gain, wealth increases. Credit can even be used in short-term investment. Credit expansion is allowed to the extent that the society has that amount of surplus wealth to lend out. Credit expansion must not exceed that limit, otherwise inflation will happen, and the whole currency system becomes unstable, and economic calculations will be twisted, even becomes impossible. How to control credit expansion within this limit? Don’t forget we have an anchor of gold price.

8.       Now we come to the field of economic policy. Let’s start with growth. Growth is a deep-rooted misconception in economics. Economic progress cannot be measured by growth rate. Progress changes the structure of economy rather than increases the amount. A 100% growth rate compared to 20 years ago does not imply that we had 2 pieces of bread for breakfast and now we have 4. Economic progress implies that we have brand new goods that we never had before. In addition, technical innovations may reduce GDP. I had to make a long distance call or send a letter to send a message from China to US before, and that contributed to GDP. Today, I send messages instantaneously to anywhere in the world, excluding PDRK, for free. WE see how prices of electronic products dive everyday. So economic progress may reduce GDP. Any economic policy aiming at certain growth rate is mistaken. Let me show you how absurd economic policies a state can make. China used to practice an official state policy of “expanding domestic demands”. The state encourages people to eat more drink more consume more instead of producing more. Why? Because that will increase growth rate.

9.       Some philosophical remarks. Complexities and extended order. Why planned economies always fail while free markets prosper? This is a philosophical issue. Let me start with physics. Physical phenomena are the SIMPLEST phenomenon. Great genius, Issac Newton, Albert Einstein and thousands of others, have been capable of promoting significantly our understanding of those phenomena. Yet we still understand only a small part of them. About chemistry, people understand much less. Even less with large molecules. Scientists have to rely largely upon empirical methods, i.e. they know how but don’t know why. In other words, people understand chemistry to a less degree. Yet by understanding how, scientists and engineers are able to produce quite some chemical products. When it comes to life phenomena, people understand very little. So far scientists cannot make the simplest cell, placate. They make something of bioactivity like insulin at best. And it is the general consensus of the scientific world that people will never create a life in a lab. For there is a limit of human intelligence– people will never be able to overcome the intrinsic complexities involved. Life can grow but cannot be made. Until as late as the 18th century, people considered human action to be controllable. With big municipalities came into being, people realize that human action has its own laws and goes beyond the control of power. It is social scientists who first recognized there is sth called spontaneous order, and it is this conception that inspired the great idea of biological evolution. This is, to my knowledge, the only example that a conception in social science inspired an idea in natural science. Later, natural science did inspire some ideas in social science, but largely in a negative way. If physics cannot be properly applied to biology, how can it be applied to human action where each individual has its free will? Behaviorism is the typical example how social science does damage. This is not the fault of natural scientists. The reason is psychologists and social scientists understand no philosophy. Extended order can be observed in any rural market, where prices, labor division and mass production appear spontaneously. So we see , government cannot plan economy properly because it cannot overcome the complexities involved. There is yet another reason. No plan can contain innovations. Notice, any state plan is an overall long term plan, like 5-year plans in Soviet Union and China. This type of plan is different from plans of individual enterprises. The state plan allows very little, if any, modification, while individual plans respond to new situations reflected by prices promptly. No individual or government can plan net society of today. Even agriculture plantation cannot be properly planned, because no government can predict new species or natural disasters or a good climate which result in big harvest. No government can properly plan for restaurants even, because it cannot predict the trend of taste of customers. The state can plan and carry it out by force, but that is necessarily a bad plan. A state plan is prohibitive in nature, while market accomodates innovations smoothly. A state plan decrees what everyone should produce and should consume, while in market economy, businessman “foster a market” for new products.

10.   Some miscellaneous notes. Marginal cost and mass production. Marginal cost is the cost of manufacturing N+1st piece after manufacturing N pieces. This conception is the key contribution of Austrian doctrine. Profit is the sales income minus cost. This is applicable to the overall sales, but does not apply to individual product. When people ask about the real cost of certain product, I have no answer. A wrongly posed question has no answer. A product from mass production has no real cost. If you ask me the cost of my mobile phone, the best I can say is that its marginal cost is very close to 0. In a mass production, the producer pays a fixed cost—facilities, power, human resources, rent of house, management etc. Then it will forecast the market and decide a price for its product. In regard to individual product, producer makes a good profit. However, the final outcome is decided by whether his overall sales surpasses his overall cost—fixed cost plus sales cost like advertising. If he gains, he was told by market that he did a right decision, and vice versa. The basic model of modern industry is mass production for the mass. I am willing to pay 1 USD for a beer with the knowledge that the marginal cost of a beer is close to zero because I would have spent hundreds of dollars to produce one for my own, if I can manage. When the brewer meets the demand of many enough clients like me, he gains. He is happy, I am happy, other beers drinkers are happy. Cheers!

11.   Competition and monopoly. Competition is a natural phenomena. A beer brewer makes good money, others will follow his example and produce beer. They will compete each other not only on price, quality but also on taste. We will have more and more kinds of beer. So the market will develop more and more niches! Consumers have more choices. But if one of the brewers is extremely outstanding and advantageous in market share, that is fine. As far as there is no barrier to the admission into the market, there is no monopoly. The state has no right to decree its partition. Monopoly comes from the state. Chinese government prohibities free admission into industries like post, telecom, petroleum and power. Monopoly is created by power, not competitive advantage.

12.   My last note is on investment. Mass production requires facilities, which is tools in the broad sense. They are not consumer goods, but capital goods aiming at producing more consumer goods in better and better manners. More than this. Capital goods make possible what was impossible. Only with tower cranes can we build skyscrapers. It is due to investment that we have production lines, containers, modern harbors, high-speed railways etc. A proper economic policy should encourage investment not consumption.

That is the whole economics. Economics is neither science nor mathematics. It is a doctrine based on a set of axioms of human action without frontier problems. I believe I have outlined the whole doctrine, although extremely briefly. According to this doctrine, governments should not intervene into economic activities, but should maintain a free space for intended order to grow. Governments should have no economic targets. Economy has its own rules, not predicted by anyone, not to be promoted by any policy. Intervention only do harm. Privatization (clear-cut ownership) and indepent and just judiciary system are the two pillars of economy. Sadly enough, they are still missing in many places.

Dean Peng studied philosophy and economics independently. He never read a textbook, only the primary source classics. These are the condensed insights from 30 years of study, averaging 5 years for each page. He is open to comments, particularly critical comments. Feel free to write to him at: deanpeng_2000@yahoo.com

Categories: Libertarian Media

Electricity, Monopoly and California’s Fiery Apocalypse

By Marc Beauchamp

As I write this, California is burning down, from rural Paradise in the north of the state to Malibu Canyon in the south. President Trump blames environmentalists and government red tape for overgrown forests. Environmentalists blame climate change and clamor for government to do something about fossil fuels.

From my perch in Redding, in far northern California, I see another way in which government contributed to these apocalyptic fires. No fire ever started because of government red tape or global warming, whether caused by man or nature. Fires start from sparks. The Camp Fire, now the deadliest and greatest destroyer of property in California’s modern history, started, it’s suspected, from sparks from transmission lines owned by Pacific Gas & Electric Company. PG&E equipment is also thought to have triggered the deadly fires in Santa Rosa and the California wine country in October of last year. California is a dry state and getting drier. It is crisscrossed by thousands of miles of electric power transmission lines. In windy conditions—or if these lines and related equipment are not properly maintained—they pose a serious risk of fire.

This Thomas Edison-era electric power generation and distribution model is laughably outmoded. Can you think of any other industry that has changed so little in 130 years? Imagine that instead of Spotify we were still playing gramophone records.

Why aren’t we all generating our own power, at our homes and businesses, using fuel cells or some other technology? Why do we have these transmission lines going everywhere, vulnerable to fires and terrorism? It’s nuts.

The reason Edison and his power lines live on is that the electric utilities, with a government-sanctioned monopoly status, have kept out competition. Many environmentalists don’t get it. They want to replace coal, hydro, gas, geothermal and nuclear generating plants with solar and wind. But even if that were feasible, solar and wind farms would still rely on power lines to bring electricity from distant locations to your home, school or place of business.

As we look at the role of forest management and climate in these fires, we also need to look at electric utilities and ask whether there isn’t a better way to make electricity. For example, I believe Google, Amazon, Apple or Tesla could do better at powering our lives than a bunch of stodgy old power companies whose rates, profits and practices are micromanaged by government bureaucrats. And we must do better.

California is facing the bankruptcy of one of its vital electric companies. Since the wine country fires, PG&E’s stock has crashed by two-thirds. It faces tens of billions of dollars in liabilities. The company suspended its dividend at the end of 2017, leaving retirees and many thousands of others high and dry.

Even more concerning: The world-beating electronics industry that drives much of California’s economy will suffer if electricity becomes less reliable, or unavailable. I’ve been thinking about this for more than twenty years, since a five-year stint working for an electric company in Hawaii. All that remains of the author’s wife’s family home near Redding.

It’s time government gets out of the way and opens the electricity business to entrepreneurs and innovation. California, with so much at stake, could take the lead in this.

With the best minds in Silicon Valley and elsewhere working on it, it can be done. I foresee a day in my daughter’s lifetime when her children will look back on Thomas Edison’s central generating station and wires going everywhere with a sense of incredulity.

Instead, they will enjoy a cleaner, more efficient and safer power system—one where we’re all producers and consumers. That day, when it comes, will truly bring power to the people.

Freelance writer Marc Beauchamp lives in far northern California. Among his former jobs he worked for the Seattle Symphony Orchestra, Kyodo News Service in Tokyo, Forbes magazine in Los Angeles, the Nasdaq Stock Market in Washington, D.C. and an electricity company in Hawaii.

Categories: Libertarian Media
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